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Judgment
S.No.,Date of Sanction,FBL,NFBL,Total
1.,29.9.2008,23.10,30.30,53.40
2.,16.3.2009,33.78,52.36,86.14
3.,26.6.2009,73.78,52.36,126.14
S.No.,"Working Capital
Lender (s)","Facility (Fund
Based) Rs.
(In Crores)","Facility ( Non -
Fund Based) Rs.
(In Crores)","Total Rs. (In
Crores)
1.,Allahabad Bank,108.13,123.37,231.50
2.,Axis Bank,54.07,81.92,135.99
3.,Bank of Baroda,144.18,146.66,290.83
4.,Bank of India,180.22,229.37,409.59
5.,Dena Bank,76.98,36.48,113.45
6.,ICICI Bank Ltd.,24.03,107.85,131.87
7.,"Indian Overseas
Bank",48.30,26.51,74.81
8.,"State Bank of
Hyderabad",48.06,67.88,115.94
9.,"S t a t e Bank of
Mysore",36.04,25.97,62.02
,TOTAL,720.00,846.00,"1,566.00
S.No.,NCD Holder,"Amount (Rupees in
Crore)",,
1.,Bank of Maharashtra,11.47,,
2.,Corporation Bank,9.17,,
3.,CSEB Gratuity and Pension Fund,7.34,,
4.,Dena Bank Employee Gratuity Fund,4.59,,
5.,Dena Bank Employee Pension Fund,10.32,,
6.,L&T Finance,34.40,,
7.,Syndicate Bank,9.19,,
8.,Tata Capital Financial Services Limited,19.49,,
,TOTAL,105.97,,
1,"Diamond
Power
Infrastruct
ure Ltd Village
Vadadala
,TehSavliDi st
Vadodara
(Land ,
Building &
Plant
Machinery )","Diamond
Power
Infrastruct
ure Ltd","29.7.2008
which was
extended on:
25.03 09, 8.04.11
26.06.13 12.09.13
29.02.14 and
21.10.15
Detailed in Schedule
3 &4 ,
Schedule 11
& 12 (Page
No. 461 â€
475)
(Page 482 â€
485)","• Part I (A)-11.03.1993
• Part I (B)- 27.6.1995
• Part II â€" 18.2.1999
• Part III â€" 01.09.2006
• Part IV- 25.2.2008
• Part V-24.1.2008
• Part VI-17.7.2007
• Part VII-17.7.2007
• Part VIII- 17.7.2007
• Part IX-24.1.2008
• Part X-02.08.2011
• Part XI-21.6.2007
• Part XII-12.3.2012
• Part XIII-23.3.2012
• Part XIV â€"19.3.2012
• Part XV-23.3.2012
• Part XVI-19.3.2012
• Part XVII-26.9.2012
• Part XVIII-21.6.2012
• Part XIX-20.7.2012
• Part XX-18.9.2012
• Part XXI â€"21.9.2012
• Part XXII-20.7.2012
• 26.9.2012
• 01.11.2012
• 10.2.2014
2,"Wind Turbine
Generator
JMD
260 , Cap acity
2.1 MW
Installed at
MojeCHarp
odi Nani Tal
Abdasa
,Dist Kutch
(Owned by
DPIL )","Diamond
Power
Infrastruct ure
Ltd","21.10.15
Detailed in Schedule
11& 12
(Page 482 â€"485)",27.2.2012
3,"Wind Turbine
Generator
JMD
260 , Cap acity
2.1 MW
Installed at
MojeCHarp
odi Nani Tal
Abdasa
,Dist Kutch
(Owned by
DPIL )","Diamond
Power
Infrastruct ure
Ltd","21.10.15
Detailed in Schedule
11& 12
(Page 482 â€"485)",27.2.2012
4,"Wind
Turbine
Generator
JMD
260 , Cap acity
2.1 MW
Installed at
MojeCharp odi
Nani Tal
Abdasa
,Dist Kutch
(Owned by
DPIL )","Diamond
Power
Infrastruct ure
Ltd","21.10.2015
Detailed in Schedule
11
& 12
(Page 482 â€
485)",27.2.2012
5,"Diamond
Projects Ltd
MojeHaripu ra
Survey No 144
&146
,TehSavli Dist
Vadodara
Building , plant
&
machinery","Diamond
Projects Ltd","29.07.08 which was
extended on: 8.04.11
29.02.14 and
21.10.15
Detailed in Schedule
5& 6 (Page No. 476
â€" 477)",10.8.2000
11,"Flat 102 , RS
No.
4/Part , sheet
no 12
, City
Survey No.
500, Janki
Apartment
, 2nd floor,
Alkapuri ,
Vadodara","Amit
Bhatnagar","21.10.15
Detailed in Schedule
7&
8 (Page No. 478 â€
479)",17.3.2015
14,"Flat 103 , RS
No.
4/Part , sheet
no 12
, City
Survey No.
500, Janki
Apartment
, 2nd floor,
Alkapuri ,
Vadodara","Sumit
Bhatnagar","21.10.15
Detailed in Schedule
9 &
10 (Page No. 480
â€" 481)",17.3.2015
much before the initiation of proceeding under the PMLA Act, it is submitted that the attachment in respect of the aforementioned properties be",,,,
vacated.,,,,
Since the action taken by the Bank of India was in accordance with law and was prior to the proceedings initiated under PMLA Act, the",,,,
proceedings initiated by the Bank of India under the Code is ought to be given precedence over the proceedings initiated under PMLA Act in respect,,,,
of the aforementioned properties. The said position has been clarified by the Honâ€ble High Court of Delhi in the matter of Deputy Directorate of,,,,
Enforcement Delhi and Ors. vs Axis Bank in CRL.A. 143/ 2018 &Crl.M.A. 2262 of 2018 dated April 02, 2019 wherein in Paragraph 171, the court",,,,
held that:,,,,
“ (xv): If the bona fide third party claimant (as aforesaid) is a ""secured creditor"", pursuing enforcement of ""security interest"" in the",,,,
property (secured asset) sought to be attached, it being an alternative attachable property (or deemed tainted property), it having acquired",,,,
such interest from person(s) accused of (or charged with) the offence of money-laundering (or his abettor), or from any other person",,,,
through such transaction (or inter-connected transactions) as involve(s) criminal activity relating to a scheduled offence, such third party",,,,
(secured creditor) having initiated action in accordance with law for enforcement of such interest prior to the order of attachment under,,,,
PMLA, the directions of such attachment under PMLA shall be valid and operative subject to satisfaction of the charge or encumbrance of",,,,
such third party and restricted to such part of the value of the property as is in excess of the claim of the said third party.â€,,,,
In the present appeal, the Subject Properties mentioned at serial number 1 and 5 of the Complaint belong to Respondent No. 2 after carrying out",,,,
due compliances were mortgaged with the Appellant in the year July 2008 and thereafter were extended from time to time on various dates till,,,,
October 2015 for securing the facilities advanced by the Appellant.,,,,
The properties mortgaged to the Appellant were acquired by Respondent No. 2 between March 1993 and January 2008. The details of the,,,,
acquisitions are mentioned in third schedule (Annexure A4 at page no. 461 to 464).,,,,
The interest in the Subject Properties stood transferred to the Appellant when the Respondent No. 2 had created a valid mortgage in favor of the,,,,
Appellant which was much prior to the alleged offence committed by Respondent No. 2 under the PMLA.,,,,
The rights of Appellant Bank being the secured creditor would survive in spite of the order of the attachment under PMLA remains operative.,,,,
Therefore, the Appellant being the lawful mortgagee/transferee of the interest in the Subject Properties are entitled to recover its dues with the sale of",,,,
the Subject Properties as the Honâ€ble High Court in the Judgment has also held that mere issuance of an attachment order does not ispo facto render,,,,
illegal prior charge of encumbrance of secured creditor, the claim of the latter of release (or restoration) from PMLA attachment being dependent on",,,,
its bonafides. the court further held “if it is shown by the cogent evidence by bonafide third party claimant (as aforesaid), staking interest in",,,,
an alternate attachable property (or deemed tainted property), claiming that it had acquired the same at a time around or after the",,,,
commission of prescribed criminal activity, in order to establish a legitimate claim for its release from attachment it must additionally prove",,,,
that it had taken “due diligence†(eg taking reasonable precautions and after due enquiry) to ensure that it was not a tainted asset and,,,,
the transactions indulged in where legitimate at the time of acquisitions of such interestâ€,,,,
The Honâ€ble High Court further held that “if it is shown by the cogent evidence by the bonafide third party claimant (as aforesaid),",,,,
staking interest in an alternative attachable property ( or deemed tainted property) claiming that it had acquired the same at a time anterior,,,,
to the commission of proscribed criminal activity, the property to the extent of such interest of third party will not be subjected to",,,,
confiscation so long as the charge or encumbrance of such third party subsists, the attachment under PMLA being valid or operative",,,,
subject to satisfaction of the charge or encumbrance of such third party and restricted to such part of the value of the property as in is,,,,
excess of the claim of the said third party.,,,,
The acquisition of such interest cannot be presumed to have been created with mala fide intent to defeat and/ or frustrate the proceeding under the,,,,
PMLA Act and hence the said properties can be held to be “tainted propertyâ€. Since in the present case, the bona fide third party claimant,",,,,
secured creditor, had initiated action in accordance with law for enforcement of interest prior to the order of attachment under PMLA, the PMLA",,,,
attachment takes a back seat allowing the secured creditor to enforce its claim and only the remainder to be made available for purposes of PMLA.,,,,
The properties in the present case are thus not liable to be attached even as “alternative attachable propertyâ€, as held in Para 165 of the judgment",,,,
of Hon`ble Delhi High Court in the case of Deputy Directorate of Enforcement Delhi and Ors. vs Axis Bank in CRL.A. 143/ 2018 &Crl.M.A. 2262,,,,
of 2018 dated April 02, 2019.",,,,
As already mentioned in the present case, it has come on record that the that the security interest in respect of the of the aforesaid properties",,,,
were created much before the date or period of the alleged criminal activity in respect of which the attachment order was passed.,,,,
The Honâ€ble Delhi High Court on the Axis Bank Judgement (supra) had observed that,,,,
“…the charge or encumbrance of third party in property attached under PMLA cannot be treated or declared void unless material is,,,,
available to show that it was created to defeat the PMLA, such declaration rendering such properties available for attachment and",,,,
confiscation under PMLA, free from encumbrance…â€",,,,
The Hon’ble Delhi High Court further observed that,,,,
“a party in order to be considered as a bonafide third party claimant for its claim in a property being subjected to attachment under,,,,
PMLA to be entertained must show, by cogent evidence, that it had acquired interest in such property lawfully and for adequate",,,,
consideration, the party itself not being privy to, or complacent in, the offence of money laundering, and that it had made all compliances",,,,
with the existing law including, if so required, by having said security interest registeredâ€",,,,
As such the properties/ assets acquired by DPIL before the initiation of the proceeding under PMLA Act and properties/ asset in respect of which,,,,
security interest has been created in favour of the bona fide secured creditor ought not be subjected to attachment in view of the aforesaid,,,,
observations of the Honâ€ble Delhi High Court and the State Action would be restricted to such part of the value of the property as it exceeds the,,,,
claim of the bona fide third party.,,,,
As such, in the present case once it has been showed by the Bank of India that proper due diligence was conducted before the properties/ assets",,,,
were mortgaged to them, the properties thus cannot be attached, neither as a “tainted property†nor as “alternative attachable property†since",,,,
it is nobody`s case that the secured creditor had not done the due diligence and/or the transactions were not legitimate.,,,,
The Respondent had passed the attachment order whilst suppressing the fact that insolvency proceeding has been initiated in respect of DPIL by,,,,
the bona fide lenders in favour of whom security interest have been created before passing the provisional attachment order.,,,,
It appears from the material available on record that in the present appeal, the Appellant at the request of Respondent No. 2 had sanctioned Term",,,,
Loan Facilities to Respondent No. 2 for construction of 3 windmills at MojeCharpodi Nani Tal Abdasa , Dist Kutch. The Appellant upon being",,,,
conducting a due diligence had sanctioned to Respondent no. 2 the term loan facilities. The Respondent No. 2 in order to secure the facilities,,,,
sanctioned by the Appellant had mortgaged the properties mentioned in serial number 2, 3, 4, 11 and 14 of the Complaint.",,,,
The properties mentioned at serial number 2,3 and 4 were acquired by Respondent No. 2 on 27th February, 2012. The details of the acquisitions",,,,
are mentioned at Annexure A4Page 482 and 483 of documents filed by the Appellant. Similarly, the properties mentioned at 11 and 14 of the",,,,
Complaint were acquired by the promoters of Respondent No. 2 on 17th March, 2015, the details of acquisitions are mentioned at Annexure A4 page",,,,
478 and 480.,,,,
It is the case of appellant that the appellant before seeking to create a mortgage of the aforementioned properties had conducted due diligence of,,,,
the purchase of the properties and upon being satisfied that the properties are in no way tainted and or benami got created mortgage in favour of the,,,,
Appellant. No contrary evidence is available on record to show that the mortgaged properties were purchased from proceed of crime.,,,,
The term loan advanced to the Respondent No. 2 for construction of windmill in District Kutch were duly constructed and were mortgaged to the,,,,
Appellant along with the land on which the 1said windmills were constructed since there is no negligence or involvement of any bank in any manner in,,,,
the alleged offence.,,,,
Thus, the attachment of the encumbered property by Respondent No. 1 treating to be tainted is not valid argument if the bonafide third party",,,,
claimant (as aforesaid) is a ""secured creditor"", pursuing enforcement of ""security interest"" in the property (secured asset) sought to be attached, it",,,,
being an alternative attachable property (or deemed tainted property), it having acquired such interest from person(s) accused of (or charged with) the",,,,
offence of money-laundering (or his abettor), or from any other person through such transaction (or inter-connected transactions) as involve(s)",,,,
criminal activity relating to a scheduled offence, such third party (secured creditor) having initiated action in accordance with law for enforcement of",,,,
such interest prior to the order of attachment under PMLA, the directions of such attachment under PMLA shall be valid and operative subject to",,,,
satisfaction of the charge or encumbrance of such third party and restricted to such part of the value of the property as is in excess of the claim of the,,,,
said third party.In the situations covered by the preceding, the bonafide third party claimant shall be accountable to the enforcement authorities for the",,,,
“excess†value of the property subjected to PMLA attachment. Counsel for the appellant is agreeable to deposit the excess value with the,,,,
respondent no. 1.,,,,
The Appellant had declared the account of Respondent No. 2 as NPA and initiated an action under the SARFAESI Act as well as IBC Code,,,,
2016 against the Respondent No. 2 and its guarantors. Upon admitting the petition filed by one of the consortium members before NCLT Ahmadabad,",,,,
the Resolution Professional has been appointed for initiation of corporate insolvency process. The Appellant in order to recover its outstanding dues,,,,
has to sell the assets of the Respondent No. 2 and its promoters that were mortgaged to the Appellant at the time of sanctioning of various credit,,,,
facilities to the Respondent from time to time for running its business. The facilities sanctioned by the Appellant after conducting due diligence and in,,,,
strict compliance of the letter of sanction issued by each member bank.,,,,
Therefore, it is not possible to hold that the mortgaged properties claimed by the Appellant in no way can be considered to be “Proceed of",,,,
Crime†under Section 2(u) of PMLA. The impugned order does not disclose any reasoning. There is no application of mind whatsoever and it is,,,,
assumed that the properties in question are the proceeds of the crime. There is no reasoning to show as to how the attached properties mortgaged,,,,
prior to the date of alleged offence are the subject matter of proceeds of crime. The Adjudicating Authority has not analysed the facts at all. The,,,,
order suffers from a fundamental error. There is no understanding by the Adjudicating Authority of the contents of the statute, much less its",,,,
application to the facts of the case.,,,,
Section-3 of the Act provides that only a person who is knowingly a party to any activity or is involved in such activity connected with proceeds of,,,,
crime and projects or claims it as untainted property can be guilty of the offence. S.5(1) shows that before any property can be provisionally attached,,,,
there must be material prima facie to show any person is in possession of any proceeds of crime which are likely to be concealed, transferred or dealt",,,,
with in a manner which may frustrate the confiscation proceedings thereof. The primary requirement for invoking S.5(1) is that there must be material,,,,
to show that some proceeds of crime are in possession of any person. The requirement is that material must indicate that any property of whatever,,,,
description in possession of any known person is “proceeds of crime†as defined in S. 2 (u). Finally adjudication proceedings are under S.8.,,,,
Perusal of S.8 (1) shows that if any person has committed an offence under S. 3 or is in possession of proceeds of crimehe may be served notice to,,,,
indicate the sources of his income etc. out of which or by means of which he has acquired the attached property. This obviously means that if in,,,,
response to the notice, the person in possession discloses legitimate means for having acquired the property in question, the property cannot deemed to",,,,
be involved in money laundering. Therefore, the attachment thereof cannot be confirmed.",,,,
The legal implication of a mortgage must be understood by both authorities. When a property is mortgaged, the only right which is left in the",,,,
mortgagor is that of the equity of redemption. Otherwise the entire corpus of the property passes to the mortgagee i.e. the appellant Bank in this case.,,,,
The mortgagee has a right to take over the possession of the property and to realise it whereas the mortgagor who is left only with the equity of,,,,
redemption has only the right to make full payment of the dues of the mortgagee and then redeem the property. Otherwise the mortgager is not left,,,,
with any vested right. In other words the mortgaged assets are essentially assets of the appellant Bank and not of the mortgager.,,,,
B. RAMA RAJU V. UOI AND ORS. Reported in (2011) 164 company case 149(AP)(DB) who has dealt with the aspect of bonafide acquisition,,,,
of property in para 103. The same read as under:-,,,,
“103. Since proceeds of crime is defined to include the value of any property derived or obtained directly or indirectly as a result of,,,,
criminal activity relating to a scheduled offence, where a person satisfies the adjudicating authority by relevant material and evidence",,,,
having a probative value that his acquisition is bona fide, legitimate and for fair market value paid therefor, the adjudicating authority must",,,,
carefully consider the material and evidence on record (including the Reply furnished by a noticee in response to a notice issue under,,,,
Section 8(1) and the material or evidence furnished along therewith to establish his earnings, assets or means to justify the bona fides in the",,,,
acquisition of the property); and if satisfied as to the bona fide acquisition of the property, relieve such property from provisional",,,,
attachment by declining to pass an order of confirmation of the provisional attachment; either in respect of the whole or such part of the,,,,
property provisionally attached in respect whereof bona fide acquisition by a person is established, at the stage of the section 8(2)",,,,
process…â€,,,,
The Appellant undertakes to deposit any amount realized, which is in excess of its outstanding dues, with the ED if such situation would arise.",,,,
Adjudicating Authority failed to apply its mind at the time of issue of the Show Cause Notice (“SCNâ€). No reason to believe can be discerned,,,,
from the SCN, or the provisional attachment order accompanying the SCN under Section 8 of the PMLA, as to how there was reason to believe that",,,,
the Appellant was in possession of “proceeds of crimeâ€. Adjudicating Authority, in its discussions, did not even consider the reply of the",,,,
Appellants.,,,,
The Adjudicating Authority is bound by the law laid down by the higher courts. No authority has any justification to ignore the law laid down by the,,,,
Supreme Court and various High Courts and this Tribunal, who on the basis of decisions of Honâ€ble Supreme Court and various High Courts, has",,,,
delivered orders. Unless each and every judgment is distinguished or are on different facts, the different conclusion cannot be arrived. The facts and",,,,
legal issues are almost same and the Adjudicating Authority has incorrectly passed the impugned order by not following the orders passed by this,,,,
Tribunal.The appellant is a Public Sector Bank. The money must come to the public forthwith not after the trial of criminal case against the borrowers,,,,
which may take many years. The banks are in crisis, no attempt should be made to block the loan amount in order to avoid worsen positions in the",,,,
commercial market. The trial may continue against the borrowers. One is failed to understand why the bank loan amount be blocked in view of settled,,,,
law.,,,,
This Tribunal is of the considered opinion that the proceeding u/s 8 of PMLA,2002 before the Adjudicating Authority is a civil proceeding and the",,,,
Adjudicating Authority should have stayed the proceedings on passing of the moratorium order by the NCLT. The continuation of the proceedings,,,,
from the date of commencement of the moratorium order is contrary to the intention of the legislature hence the consequential order of confirmation,,,,
of PAO is contrary to law. In the facts of the present case, it appears that hurdle has been created in the process after passing the order of NCLT",,,,
which ought not to have been done. The question of registering ECIR does not arise. The passing of provisional attachment order was not application,,,,
of mind and without consulting the facts and law.,,,,
It is a matter of fact that ED has registered the ECIR and passed the provisional attachment order after the moratorium order is passed by the,,,,
NCLT. Thus, on the face of record, it is evident that the ED and the Adjudicating Authority have not understood the legal issues involved rather they",,,,
have ignored the settled law and passed the impugned order. The serious situation is that ED has registered ECIR on the basis of FIR which was,,,,
registered at the request of banks†complaint as borrowers who failed to pay the loan amount. The banks have now become victim.Therefore, both",,,,
the impugned order and provision attachment order are set-aside qua the appellant bank.,,,,
The period of continuation of proceedings before the Adjudicating Authority, PMLA, and before this Tribunal till the passing of the present",,,,
judgment and order, from the date of commencement of the moratorium order, be treated as excluded while calculating limitation of the period of",,,,
completion of the Corporate Insolvency Resolution Process.,,,,
The appeals are allowed. The impugned order dated 1st October, 2018 is set-aside. Consequently, PAO order dated 24.04.2018 is also quashed in",,,,
relation to the appellants.,,,,
No cost.,,,,